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Gevo Lowers IPO Target To $100M

Biofuel startup Gevo has lowered its upcoming IPO to $13 to $15 per share. That's about $100 million, or $89 million after fees, less than the $150 million it targeted in August, but close to what analysts have predicted.

There was good reason to expect a lower valuation from the Englewood, Colo.-based startup, Lux research analyst Samhitha Udupa told us in August. The company generated $660,000 and lost $19.89 million in 2009, and had accumulated a deficit of $50.3 million as of March 31, 2010. Still, Lux has put Gevo among its top-ranked biofuel startups for the past two years, giving it high marks for its innovative retrofit model toward cheaper production costs.

Gevo, which has backing from Khosla Ventures and Virgin Green Fund, wants to retrofit old corn ethanol plants to turn cellulosic feedstocks like agriculture waste into isobutanol, a fuel additive and precursor to plastics and other products. The startup is retrofitting an ethanol plant in Luverne, Minn. to produce about 18 million gallons of isobutanol per year, and says its retrofit model could allow it to scale up to 50 million gallons-per-year for about $24 million, or 100 million gallons for $40 million to $45 million.

Empty ethanol plants aren’t necessarily hard to come by — oil refining giant Valero bought up seven plants from bankrupt corn-to-ethanol maker VeraSun in 2009. If Gevo meets its new IPO targets, it could command a market value of $349 million, according to Renaissance Capital. The company booked $2 million in sales for the fiscal year ending in September 2010 and has said it has letters of intent from customers including chemical company Lanxess, French oil giant Total’s subsidiary Total Petrochemicals USA, plastic maker Toray Industries, airline company United Air Lines and oil industry technology developer CDtech.

One big question is whether Gevo will tackle the biofuel market right away, or focus on providing isobutanol for the plastics and chemicals industries. The company got EPA clearance to sell its isobutanol as a fuel additive in November, but it is also looking to supply makers of plastics, fibers, rubber and other polymers.